Digital: The New X Factor

by Tim Metzner

Over the past few years we have had the pleasure of helping some great companies who are established leaders figure out how they can leverage digital to not just stay on top, but create a wider moat around themselves. We believe that the companies who are most willing and prepared to take a startup-like approach to leveraging digital will be the ones who win the next decade.

There are a ton of gems in here, but here are a few that most stuck out to me, based on our experience at Differential.

“Digitally enabled innovations often have network effects associated with them, which in turn leads to “winner take most” outcomes; the top-performing companies enjoy far higher profit margins than the rest, and a handful of frontier firms are leaving everyone else in the dust”

My take: In other words, “let’s watch and see how others do this” is no longer a viable strategy. If you’re not an early mover, there’s a good chance you lose (or end up having to spend very aggressively on M&A to try and stay relevant).

“Big incumbent firms in particular are struggling to keep up as more agile digital challengers deliver products and services in faster and cheaper ways. But it’s worth noting that not all of the have-mores are young firms that were born digital.”

My take: Yes, startups can move faster, take risks and don’t run the risk of cannibalizing their core business (or losing existing customers), but there are plenty of examples of established leaders who are also aggressively running after what it looks like to leverage digital (and they are winning big). To do this well, you’ll have to take a different approach (for example, P&G is partnering with outside experts to launch startups as spin offs outside their walls), but it’s a worthwhile investment.

“Digital innovation has been largely focused on consumers in recent years, but now big data and the Internet of Things are beginning to change the way things are actually produced. Companies in manufacturing, energy, and other traditional industries have been investing to digitize their physical assets, bringing us closer to the era of connected cars, smart buildings, and intelligent oil fields.”

My take: Digital innovation rapidly coming for every industry. By way of example, take a look at the venture capital dollars that are flowing into the traditionally stodgy slow-moving industries of banking and insurance.

What industries/opportunities jump out at you as ones that might benefit the most from disruption?